Bush refused to confirm or deny the allegations

A storm of protest erupted after the New York Times said the National Security Agency (NSA) was allowed to eavesdrop on hundreds of people.

Senators from both sides called for an explanation and investigation.

Mr Bush refused to confirm or deny the claims, but said he always upheld the law and protected civil liberties.

The president said he would not discuss ongoing intelligence operations.

But he added: "I will make this point. That whatever I do to protect the American people, and I have an obligation to do so, that we will uphold the law, and decisions made are made understanding we have an obligation to protect the civil liberties of the American people."

NATIONAL SECURITY AGENCY Formed in 1952 Biggest US security agency, with 38,000 employees Nicknamed "No Such Agency" Has a dozen listening posts around the world, tracking phone calls, diplomatic traffic, emails, faxes May record up to 500 million hours of traffic every day On US soil, can only listen to "agents of a foreign power" America's most powerful spy agency Q&A: US spying row

The New York Times said Mr Bush signed a secret presidential order following the attacks on 11 September 2001, allowing the NSA, based at Fort Meade, Maryland, to track the international telephone calls and e-mails of hundreds of people without referral to the courts.

Previously, surveillance on American soil was generally limited to foreign embassies.

Critics have questioned whether wider surveillance in the US crosses constitutional limits on legal searches.

American law usually requires a secret court, known as a Foreign Intelligence Surveillance Court, to give permission before intelligence officers can conduct surveillance on US soil.

'Big brother'

Republican Senator John McCain called for an explanation.

Senator Arlen Specter, Senate Judiciary Committee chairman and another Republican, said "there is no doubt that this is inappropriate", adding that Senate hearings would be held early next year as "a very, very high priority".

Despite handshakes, McCain and Bush have taken different sides

"This is Big Brother run amok," was the reaction of Democratic Senator Edward Kennedy, while his colleague Russell Feingold called it a "shocking revelation" that "ought to send a chill down the spine of every senator and every American".

The allegations coincided with a setback for the Bush administration, as the Senate rejected extensions to spying provisions in the Patriot Act.

BBC Washington correspondent Justin Webb said it is a sign of intense concern about infringements of civil liberties in the name of security.

The White House is having a tough time convincing even its Republican supporters that the things it does in the name of the war on terrorism are always justified, he adds.

Echoes of Vietnam

Administration officials issued a robust defence of anti-terrorist operations, saying they had prevented several attacks - including one on targets in Britain.

But the American Civil Liberties Union (ACLU) said eavesdropping in the US without a court order and without complying with the procedures of the Foreign Intelligence Surveillance Act was "both illegal and unconstitutional".

"The administration is claiming extraordinary presidential powers at the expense of civil liberties and is putting the president above the law," director Caroline Fredrickson said.

To opponents of the Bush administration, the alleged bugging programme is reminiscent of the widespread abuse of power by the security services during the Vietnam War when anti-war activists were monitored illegally, our correspondent says.